Prime Minister assesses the state of France’s economy

European Union/economic policy – Excerpts from the interview given by M. Jean-Marc Ayrault, Prime Minister, to the daily newspaper Les Echos

Paris, 14 March 2014

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Q. – Brussels has put France under “enhanced surveillance”. Is the date for a return to [a deficit of] 3% [of GDP] renegotiable?

THE PRIME MINISTER – We’ve made commitments. We’ll stick to them. We’ll find out on 31 March what the exact deficit was in 2013. For 2014, we’ve already provided for a precautionary reserve of €7 billion, which should enable us to handle contingencies. Let me remind you that France’s deficit in 2009 was 7.5%. If we’d done nothing, the deficit would have been well above 5%. We brought it down to 4.8% as early as 2012, then 4.1%. What we’ve done is considerable.

Q. – There are no savings visible on the horizon. Will you manage to come up with €50 billion?

THE PRIME MINISTER – The €50 billion in savings are necessary to reduce the deficit and the debt, while financing our priorities. Structural reforms are needed to make government action more effective, with a concern for sharing the effort and for fairness. It’s a stringent, unprecedented target, and we’re working methodically. The time will soon come for decisions, but we’re still in the phase of taking stock and analysing all the possible room for manoeuvre. We’re examining everything. (…)

THE PRIME MINISTER – The Gallois report made a clear and alarming assessment. Industry’s share of value added fell from 18% in 2000 to 11% in mid-2012. Our market share in Europe fell from 12.7% to 9.3% and our non-energy trade balance was reversed. To counter this erosion, the government has galvanized the industrial sectors. Nearly 300 actions have been launched.

We’re starting to see the results. Industry’s share of GDP rose to 11.5% at the end of 2013, mark-ups were back to 23% compared to 19% in mid-2012, and investments by non-financial companies have picked up again.

The challenge is to increase this trend. In the autumn we presented 34 plans for the “New Face of Industry in France”, whose aim is to get companies cooperating to produce, together, products and services that are competitive in future markets. This Friday we’re launching the first five, which focus on low-carbon mobility. We’re talking about vehicles that travel 100km on two litres, about fuel cells, about electric-powered satellites, with a first flight possible in 2017, and about electric planes, with a first flight in the course of 2014.

Q. – Does the level of the euro harm France’s productive system?

THE PRIME MINISTER – A strong euro may harm some companies and benefit others. For all that, it’s true that the euro is a little overvalued. Furthermore, the IMF itself agrees about this. But that mustn’t deter us from making efforts to regain competitiveness. Within the Euro Area, competitiveness is only partially linked to exchange rates. That’s why the government is acting with the CICE [competitiveness and employment tax credit] and the Responsibility Pact.

Q. – But shouldn’t Europe change its mindset on industrial policy?

THE PRIME MINISTER – Clearly this is a key issue. There’s an industry Commissioner in the panel of European commissioners, but he has little power. Europe must implement a genuine industrial policy which isn’t restricted to a competition policy. There must be a link when it comes to investment and innovation. I think that the campaign for the European Parliament elections is going to allow us to put all these issues on the table./.